Securities & Corporate Governance Monthly - The New Electronic Proxy Filing Requirements: What You Need to Know for Your 2008 Proxy
The Securities and Exchange Commission (SEC) has adopted amendments to its proxy rules requiring all issuers and other proxy soliciting persons to provide internet access to proxy material. Solicitations in respect of business combinations
are not covered by the e-filing proxy rules. The rules provide issuers and other proxy soliciting persons with the option of choosing one of two alternative methods of distributing its proxy materials to shareholders: the “notice
only option” and the “full set delivery option.”
The mandatory e-filing proxy rules become effective for large accelerated filers (other than registered investment companies) on
January 1, 2008. For all other issuers (including registered investments companies) and proxy soliciting persons, the rules become effective on January 1, 2009. Issuers and other proxy soliciting persons are not restricted to
using either the “notice only option” or the “full set delivery option” exclusively, as the rules permit using the notice only option for some shareholders and the full set delivery option for other shareholders.
NOTICE ONLY OPTION
The notice only option requires that all proxy soliciting persons comply with the same requirements prescribed under the voluntary “notice-and-access” model of proxy distribution the SEC adopted earlier this year. Under
the notice only option, each proxy soliciting person must make its proxy materials available on a publicly-accessible internet website, and must provide shareholders with a Notice of Internet Availability of Proxy Materials (the
“Notice”) at least 40 calendar days before the scheduled shareholder meeting or corporate action. The Notice must include the following information:
- A prominent legend in bold-face type that states:
"Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on [insert meeting date].
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- This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.
- The [proxy statement] [information statement] [annual report to security holders] [is/are] available at [insert website address].
- If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before [insert a date] to facilitate timely delivery.”
- This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.
- The date, time and location of the meeting, or if corporate action is to be taken by written consent, the earliest date on which the corporate action may be effected;
- A clear and impartial identification of each separate matter intended to be acted on and the soliciting person’s recommendation, if any, regarding those matters, but no supporting statements;
- A list of the materials being made available at the specified website;
- A toll-free telephone number, e-mail address and internet website address where a shareholder can request a paper or e-mail copy of the proxy materials for all meetings and for the particular meeting to which the Notice relates;
- Any control or identification numbers the shareholder needs to access his or her proxy card;
- Instructions on how to access the proxy card, provided that such instructions do not enable a shareholder to execute a proxy without having access to the related proxy statement; and
- Information about attending the shareholder meeting and voting in person.
The Notice must be written in plain English and may contain only the information required or allowed by the rules and any other information required under state law. The rules permit the Notice to include a statement advising shareholders
that no personal information other than the shareholder identification or control number is required for shareholders to execute a proxy.
An issuer or other soliciting person is not required to send subsequent mailings or correspondence to the shareholder after delivery of the Notice, with the exception that issuers and other soliciting persons must deliver paper or
e-mail copies of the proxy materials to any shareholder specifically making such a request within three business days after receiving the request. The rules prohibit issuers and other soliciting persons from delivering the form of
proxy to a shareholder with the Notice. Soliciting persons may deliver the proxy card ten 10 calendar days after delivery of the Notice if the proxy card is accompanied by a “replacement” or “reminder”
notice, and the rules allow issuers and other soliciting persons to deliver the proxy card at any time after the Notice is delivered if the proxy card is accompanied by the full paper set of proxy materials. The soliciting person
must provide a mechanism by which shareholders can vote beginning as of the date of the Notice (which may include telephone or internet voting).
The SEC allows soliciting persons to “household” a Notice by mailing only one copy of the Notice to shareholders residing at the same address, but such Notice must provide separate identification or control numbers to allow each household account to execute separate proxies.
Recent examples of companies using the notice only option include Microsoft, Sun Microsystems and Sara Lee, each of which filed their respective Notices as additional soliciting material.
FULL SET DELIVERY OPTION
The full set delivery option is identical to the historical paper delivery method of proxy delivery, with two exceptions: (1) the issuer or other soliciting person must post its proxy materials on a specified website no later than
the date the soliciting person initially delivers paper copies of the full set of proxy materials, and (2) paper delivery of the full set of proxy materials must include the Notice or must incorporate the content of the Notice. Proxy
distributions under the full set delivery option differ from proxy distributions under the notice only option in the following ways:
- Issuers and other soliciting persons are not required to deliver the Notice and full set of proxy materials at least 40 calendar days prior to the shareholder meeting or corporate action;
- The proxy card is submitted with the Notice, as the proxy card is included with delivery of the full set of proxy materials;
- Issuers and other soliciting persons are not required to deliver additional copies of the proxy materials upon request from a shareholder, and the Notice need not include the legend relating to shareholder requests of paper or e-mail
versions of the proxy materials; and
- Issuers and other soliciting persons may, but are not required to, provide an alternative means for voting.
WEB SITE AVAILABILITY OF PROXY MATERIALS
Regardless of whether an issuer or other proxy soliciting person elects the notice only or full set delivery model of proxy distribution, the full text of the proxy materials must be available at the website specified in the Notice
(or, in the case of the full set delivery option where the soliciting persons elects to not deliver a Notice, in the proxy materials containing the content of the Notice) no later than the date the Notice is delivered to the shareholders.
The full set of proxy materials must include the proxy statement, annual report to the shareholders and proxy card (or, in the case of a beneficial owner, a request for voting instructions). The proxy materials must be available
on a website other than the SEC’s EDGAR website, must remain on the website throughout the conclusion of the related shareholder meeting or corporate action, and must be presented on the website in a format convenient for
both reading online and printing on paper. The rules prohibit the issuer or other soliciting person from using the website in a manner that infringes on the anonymity of shareholders accessing the website.
The rules allow, but do not require, the website to provide a means for shareholders to cast a vote online. Issuers and other soliciting persons may therefore provide for an alternative method for casting votes such as printing or
downloading the proxy form from the website or providing a toll-free telephone number. If a telephone number is provided for purposes of executing proxies, the telephone number may appear on the website, but may not be included on
the Notice.
INTERMEDIARIES
Intermediaries such as transfer agents, banks, and brokerage firms must follow the proxy distribution model used by the issuer or other soliciting person whose proxy materials the intermediary delivers. Therefore, proxy soliciting
persons complying with the notice only option must provide each intermediary with the information necessary for the intermediary to prepare and deliver the Notice and post the proxy materials on the website, and soliciting persons
must do so in sufficient time to enable the intermediary to meet the 40-day deadline. Issuers and other soliciting persons using the full set delivery model need not comply with the 40-day deadline, but they must still provide the
Notice and proxy materials to each intermediary in sufficient time to allow the intermediaries to prepare and send the Notice and proxy materials to the beneficial owners.